Detariffing and the death of the filed tariff doctrine: deregulating in the "self" interest.

• Author: Helein, Charles H.

1. INTRODUCTION

   After nearly two decades (1) and several trips to the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit Court"), (2) the Federal Communications Commission's wish to rid itself of the burden of processing and warehousing reams of long-distance domestic tariffs (3) became a reality on July 31, 2001. (4)

   In a May 9, 2000 Public Notice (5) following the D.C. Circuit Court's decision upholding the FCC's mandatory detariffing order, (6) long-distance carriers were required to withdraw their paper tariffs for domestic long-distance mass market services from the Commission. (7) In the place of filed tariffs, long-distance carriers were required to post their "rates, terms and condition[s]" on their Internet Web sites or, if they did not maintain a Web site, to make this information available in one central location where the public could inspect them during regular business hours. (8) Similar requirements applied to carriers offering specialized customer arrangements, or "contract tariffs." (9) The deadline for posting contract tariffs on the Internet was also January 31, 2001. (10)

   In what can be described as a paroxysm of overzealous consumerism, the FCC, in effect, announced its opinion that as a result of detariffing, carriers may no longer rely upon the Filed Tariff Doctrine (a.k.a. Filed Rate Doctrine). (11) The chief effect of this announcement, expressly encouraged by the FCC, is to open the carrier-customer relationship to the scrutiny of state authorities, like the State Attorneys General and state consumer-protection laws. In addition, legal challenges based upon the principles of contract law were also "endorsed" by the FCC. (12)

   The consequences of such an environment are directly linked to the financial bottom line of long-distance carriers. Today it can cost a long-distance carrier approximately $300 to acquire a new customer (13) or to retain an existing customer. Without tariffs, it is certain that these costs will rise and even explode to $1,000 or more. A carrier's costs of complying with the strict liability standard of the anti-slamming, (14) anti-cramming, (15) and other consumer-protection rules (16) have been extremely high. Now that the Attorneys General of the states and other state consumer agencies are able to attack the sales and marketing practices of long-distance carriers under state consumer-protection laws, compliance and appeasement costs are likely to skyrocket. (17) This is even more troubling in the current regulatory environment in which State Attorneys General offices, utility commissions, and the FCC use a handful of customer complaints to extract costly settlements from carriers. The bottom line is that the incentives created by the enforcement of the slamming rules (to make headlines and political hay and gain revenues for state and federal coffers through this telecommunications version of the "speed trap") have never been greater and will only increase as a result of detariffing.

   The bad news does not end there for long-distance carriers. Single plaintiff and class action civil suits for misrepresentation, fraud, breach of contract, and even unfair competition are all now certain to become a larger part of the regulatory fabric of telecommunications. While this view of the FCC's detariffing action can and will be disputed, and the argument will be made that consumers must be protected, it cannot be denied that the FCC and its state brethren have not paid the slightest attention to the other side of the story. That is, the costs that will be imposed on all consumers because of the desire to penalize carriers, without limits, for the allegations of a few consumers. This will be the real legacy of FCC-mandated detariffing.

   Since detariffing has only been in effect for a short while, it is too early to gauge even the near term economic and operational impacts of the detariffing mandates and Internet posting requirements. But the FCC and state regulatory agencies have already acted to use consumer protection laws to affect the legal relationship of carriers with their existing and future customers, and to change the fundamental jurisdictional environment in which carriers must market, price, and operate. This Article will explore some of these issues.

   This Article reviews the history of the FCC's detariffing efforts. It then addresses the major issue raised not so much by detariffing itself, but by the FCC's view of the detariffing order's impact on the Filed Tariff Doctrine. This legal doctrine is one under which long-distance carriers have operated for decades. Its principal effect is to override general contract and state consumer protection laws that are designed to protect individuals in order to advance and protect broader public interests. Notwithstanding the existence of the Doctrine for nearly a century or the Supreme Court's recent unequivocal affirmation of its continued validity and vitality, the FCC, through detariffing, has declared the Doctrine dead. The Authors have formally opposed the FCC's declaration (18) and restate and update that opposition herein. In Part III, this Article shows that the Doctrine is alive and well, and in a government of laws, not men, the doctrine will stay that way until the U.S. Supreme Court or Congress explicitly says otherwise. This Article moreover suggests that the FCC's motivations behind detariffing have failed to consider, much less attempted to properly balance, the conflicting public interests involved. Instead, the FCC has substituted political expediency and populous pandering for its congressionally-imposed duty to regulate in the public interest. (19)

   This Article also compares and contrasts the legal rights enjoyed by long-distance carriers under the Filed Tariff Doctrine to the rights and potential liabilities of carriers in its absence. Finally, this Article discusses the actions several states have taken immediately following the July 31, 2001 effective date of the FCC's mass-market detariffing order and simultaneous declaration that the Filed Tariff Doctrine is dead. The Article concludes that the FCC's action is a manifest injustice to both carriers and consumers alike, and is a prime example of irresponsible agency regulation.

2. MARCH TOWARDS DETARIFFING

   The FCC's determination to eliminate tariffs immediately followed the breakup of the Bell System (also referred to in this Article as "the AT&T monopoly"). (20) The Commission's motivation, although cloaked in consumer protection rhetoric, has always been derived from the more selfish desire to rid itself of the administrative burdens associated with tariffing. (21)

   Section 203 of the Communications Act of 1934 (the 1934 Act) (22) requires all common carriers (23) to file tariffs showing "all charges" for the "interstate and foreign wire or radio communications services" they provide, as well as "the classifications, practices, and regulations affecting such charges." (24) For over sixty years, when the AT&T monopoly alone dominated the long-distance industry, the Commission felt little burden administering its duties under Section 203. With the proliferation of competitive carriers in the 1980s, however, the burden seemingly proved too onerous for the FCC, and thus the Commission began its unrelenting campaign in favor of detariffing. (25)

   The FCC's campaign was immediately halted in its tracks when in 1985 the D.C. Circuit Court overturned the Commission's initial attempt to order mandatory detariffing. (26) Subsequently, the FCC adopted a permissive--that is, optional--detariffing policy (27) which met the same fate in the D.C. Circuit Court. (28) The court opined that the 1934 Act did not legally authorize the FCC to implement a detariffing policy, permissive or otherwise. (29) Nearly a decade later, the tide turned in the FCC's favor when Congress passed the Telecommunications Act of 1996 (the 1996 Act), giving the FCC the authority to forbear from regulatory measures determined to be unnecessary to protect consumers. (30)

   With its new forbearance authority, the FCC resurrected mandatory detariffing through its 1996 Detariffing Order. (31) Although carriers succeeded in staying the Order pending judicial review for several more years, on April 28, 2000 the D.C. Circuit Court denied the appeals, and on May 1, 2000 lifted the stay. (32) Days later, the FCC issued its Public Notice establishing a Transition Plan and cementing its detariffing mandate. (33)

   The Transition Plan required all carriers to cancel and withdraw their existing interexchange domestic tariffs, including contract tariffs, within nine months, or by January 31, 2001. (34) The FCC later extended the deadline for mass-market tariffs until July 31, 2001. (35)

   Now that both of these critical dates have passed, domestic detariffing is in full effect. (36) One would think that an industry that had operated pursuant to tariffs throughout its existence, and had battled the FCC's attempts to detariff for nearly twenty years, would be making a great deal of noise about transitioning to the new environment. For the most part, however, the industry has been very quiet. Why is this the case? This silence quite possibly stems from uncertainty and fear. Fear that uncertainty about the status of the key component of tariffing, the Filed Tariff Doctrine, (37) and fear that their chosen method of addressing the FCC's mandates (i.e., Internet posting of rates, terms and conditions (38) and establishing carrier-customer relationship in a detariffed environment) (39) not only complies with the FCC's expectations, but also offers adequate legal protections in the event that the Filed Tariff Doctrine ceases to exist, as the FCC insists.

   In its October 1996 Order directing the mandatory detariffing of domestic interstate, interexchange services, the FCC repeatedly announced its philosophy that the absence of tariffs will eliminate the possible invocation of the...